Money.Net Is Trying To Kill Off The Bloomberg Terminal

A former commodities trader who worked at
Bloomberg for five years, Morgan Downey, 43, started Money.Net in 2014. His goal: Offer a superior product to the $25,000-a-year Bloomberg terminal at a fraction of the price. Money.Net sells an intuitive software platform that has all the functionality of a Bloomberg, according to Downey, for a subscription fee of just $1,800 a year. He won’t reveal 2015 revenue, except to say it was in the “millions.” Based in New York, Money.Net has 60 employees and is still operating in the red, but he says he’s signing up customers fast and expects to break even next year. His investors include ex-Citibank CEO Vikram Pandit. In this condensed and edited interview, Downey describes how he decided to take on an industry that has been dominated by Bloomberg and
Thomson Reuters.

Morgan Downey: I grew up in Ireland in a place called County Limerick on the West Coast. It’s a very rural area. At university in Ireland I studied computer science and finance. My first job, in 1993, was at Citibank in New York in a division called fixed income derivatives. Then I worked in commodities derivatives, doing things like helping airlines hedge their jet fuel and mining companies hedge the price of copper. For the next 15 years I was a commodities trader at Citibank and
Bank of America in New York, Sydney, London and then Singapore.

Adams: How did those jobs lead you to Bloomberg?

Downey: Fast forward to 2008 when I moved back to New York. I was always the guy on the trading floors of Citi and Bank of America saying we should use technology. Rather than hire 50 traders or 500 salespeople, I’d ask, can I do that on a machine? I met this guy named Tom Secunda who [co-founded] Bloomberg in the 1980s. He asked me to join Bloomberg as global head of commodities. I was at Bloomberg for just under five years.

Adams: What made you want to start a competitor?

Downey: Two big things. There’s a need in the market for a product that is much more intuitive and more affordable than Bloomberg and Thomson Reuters. They have a reputation and they also have a reality. They’re very difficult-to-use products. They feel like they were designed in the 1980s and the reality is they were designed in the 1980s.

Adams: What’s wrong with the design?

Downey: People want machines that shouldn’t require any explanation or training. Commonly you hear people say, “I have a Bloomberg system but I don’t know how to use it.”

Adams: What’s the second reason you wanted to compete with Bloomberg?

Downey: Price. Bloomberg is $25,000 a year per user. You could hire someone for the price of two Bloomergs.
J.P. Morgan pays over $400 million a year just for Bloombergs. Bank of America pays close to $500 million. The dollar amounts are huge.

Adams: What made you think you could do a better job?

Downey: The cost of the technology that goes into building the product has collapsed in the last five years because of the cloud. You can do five or ten times more of the technological development work for a tenth of the cost and almost ten times more quickly. Customers can see that they’re being vastly overcharged.

Adams: If that’s true, how can Bloomberg and Thomson Reuters continue to command such high prices?

Downey: The barriers to entry into their field are quite significant.

Adams: What are those barriers?

Downey: There are five or six big ones. One is you have to build a back-end system. Customers don’t see it but it costs at least $10 million to $20 million to build. We’re standing between our customers and the exchanges and other sources of data. You’ve got equity and futures exchanges. They’re sending all these data points into Money.Net. We’ve got to build a system to receive all that data. It’s called a ticker plant. Then you’ve got to turn around and deliver the data to your customer. This all has to happen in ultra-high-speed real time. Before we’d written one line of code for the front-end system that the user interacts with, we had to spend a huge amount of money building the back-end system. What kind of person in his right mind will build that without signing up a single customer?

Adams: What was another barrier?

Downey: You’ve got a long lead time for customer sales. The sales cycle is 12 months at one of these big banks. That’s just to get one customer. The reason is network security. Most people, if they start a new company, want revenue from day one with no back-end system.

Adams: What were the other challenges you faced building the system?

Downey: In order to build what a trader on a trading floor or a consumer of financial information needs, you need to sit in that trader’s chair. You have to have worked in the financial services industry for five or ten years to know in your gut what that person wants. You can’t learn that from a survey. Or if you’re a kid who just graduated from a high-flying university, you can’t build what that person wants or potentially needs. Very few people have worked on trading floors. That was Mike Bloomberg’s background. He had worked in finance at Salomon Brothers and in the technology division there. He didn’t need to ask anyone what to build.

Adams: Does your system have a terminal like a Bloomberg?

Downey: No. We’re building a platform. People want to boot up one piece of software that’s got everything.

Adams: What made you think you’d succeed?

Downey: We were able to raise the capital we needed to finance what we needed to build.

Adams: How much did you need?

Downey: It was in the tens of millions. We raised it from private, wealthy individuals, who put in a few million dollars each. Vikram Pandit, the ex-CEO of Citibank, was one of our investors, as was Michael Litt, who worked at FrontPoint, the hedge fund in the movie “The Big Short,” that bet on the sub-prime mortgage collapse.

Adams: How much of your own money did you put in?

Downey: A few million. I also put in sweat equity. My salary here is a dollar a year. It’s tough to live in New York on a dollar a year! Obviously I own equity. That is a real investment. We’re putting intellectual property into the firm.

Adams: How long did it take you to build the back end?

Downey: Six months for the first version of the product.

Adams: How involved were you in building the system?

Downey: Heavily. I like to do product design. It’s a passion. A lot of the developers we hired had worked in banks. One of the fortunate things about hiring in New York City is the banks have been downsizing their staffs. But you still have to pay up because you’re competing with
Google and Facebook.

Adams: How did you figure out how to price your product?

Downey: Two ways. One is we looked at how much it cost us to build. We said let’s put a profit margin on top of that. The other way was asking, what will the market pay? The fact that Bloomberg is just under $2,500 a month and Thomson Reuters is $2,000 a month told us that there was a market at those price points. Bloomberg has got 325,000 customers paying that price and Thomson Reuters has 380,000 customers paying that price. But neither of them have been growing for the past five, six or seven years. The reason is that their price point is saturated. There are only so many people in the world who will pay that. At a lower price point there’s a huge unserved market. There’s no product out there for those users. We said, let’s price our product as low as possible, where we can still be profitable. We priced our product at $150 a month. People did a double take, it was so low.

Adams: How did you make your first sales?

Downey: From a power point. We were showing pictures of what the product would look like. We tried a few things, like a week free or a month free. We’ve found that our product is such a value play against Bloomberg and Thomson Reuters, people almost ignore the presentation and say yeah, I’ll just use it. They say, why not try it?

Adams: What does your product do that Bloomberg doesn’t?

Downey: The software is much more intuitive. All of the data and content you can get on Bloomberg, you can get on Money.Net.

Adams: People don’t need to be trained to use Money.Net?

Downey: Yes. You just start up the software. But if you want, we can train you.

Adams: What can a Bloomberg terminal do that Money.Net can’t?

Downey: Bloomberg has a proprietary chat system. It’s almost monopolistic. A lot of Wall Street uses it. In a lot of banks, you’ll have two people using Bloombergs and they don’t look at anything but the chat. They’re paying $25,000 a year to be on chat. It’s ridiculous.

Adams: How have sales been going thus far?

Downey: We started selling in 2014, but the first 18 months it was all through word of mouth and references. We’d get inbound inquiries. We only started building our sales force two months ago. Most of our customers have said not only, we’ll buy from you guys, but we’ll help you. There has been no competitor to Bloomberg and Thomson Reuters for 20, 25 years. We’re helping them solve a pain point of paying for these two ridiculously expensive systems.

Adams: What details can you share about your customers?

Downey: We have thousands of paying customers, at all the major banks in the US and internationally. We’ve got customers at hedge funds and we’ve got financial advisors. We’ve got non-standard customers like business schools like Wharton. We’ve got libraries including the New York Public Library and the Greenwich library in CT. North America counts for 65% of our customers but we’ve got paying customers in 57 countries. We’re likely to open an office in Europe this year.

Adams: What mistakes have you made?

Downey: We’ve spent money going to financial industry conferences, trying to raise awareness about the product. Some of them work but you don’t know that they’ll work until you get there. One thing that could derail the product is becoming too distracted by adjacent opportunities. We get constant inbound requests to do development for other people, to develop things that aren’t core to our product. There’s usually money involved. We’ve gotten good at saying no.

Adams: What’s the toughest thing about what you’re trying to do?

Downey: Recruiting the right people. We spend a huge amount of effort on recruitment.

Adams: Do you really think you can kill off the Bloomberg and Thomson Reuters terminals?

Downey: I can’t imagine those companies can exist in their current format five, ten years from now. Bloomberg and Reuters are like TWA and Pan Am. The fact that we exist and we’ve got paying customers is proof these big guys can’t survive without changing their products. They should be building the product that kills their product. We’re ten times less expensive and we’ve got a better product. Why the heck would someone buy a Bloomberg? It’s only a matter of time.

Adams: Did you try to raise these issues at Bloomberg before you left?

Downey: I’m under a confidentiality agreement about my time there.

Adams: Have you heard from Mike Bloomberg since you started Money.Net?

Downey: I have not spoken to him since I left

Adams: Do you have any plans to run for mayor?

Downey: Although I think I would do quite well in that role, I am not trying to follow in anyone’s footsteps. I am trying to blaze my own trail. Also my ambitions for Money.Net are like my sodas, big.

In February 2018, I took on a new job managing and writing Forbes' education coverage. I'd spent the previous two years on the Entrepreneurs team, following six years writing for the Leadership channel. My mission with education is to explore the intersection of education ...